Bank of Japan Gov. Masaaki Shirakawa told reporters Friday that it would take substantial effort to achieve a 2 percent inflation target, announced earlier this week, aimed at breaking a prolonged spell of falling prices that are thought to be discouraging business investment and stalling recovery for the world's third-largest economy.

The consumer price index, which excludes fresh foods, fell 0.1 percent in 2012, adding to pressure on the central bank to make progress in reflating the economy. The CPI also dipped 0.2 percent in December, as expected.

The central bank has pledged to do everything it can to meet the new inflation target declared under pressure from Prime Minister Shinzo Abe, who has made reviving the recession-stricken economy his top priority since taking office a month ago.

At the same time, Shirakawa cautioned, the central bank's role is also to ensure stability and prevent financial bubbles — a growing worry among those skeptical that massive stimulus spending and heavy-duty monetary easing will do the trick after 20 years of economic malaise.

"Bubbles cost the economy dearly," Shirakawa said. "The causes for them are varied, but they keep recurring," he said.

Shirakawa also stressed the need for improved fiscal discipline. With Japan's public debt already over twice the size of the economy and rising fast, if the central bank appears to be carelessly buying government bonds to achieve its target inflation rate, "long-term interest rates will jump and erode the effect of monetary easing," he said.

While the central bank agreed to the inflation benchmark and "unlimited" monetary easing through open-ended asset purchases, the government must do its part to push ahead with reforms needed to revive growth and improve Japan's competitiveness, he said.